Stefanini Philippines, Inc. v. Commissioner of Internal Revenue

SPECIAL FIRST DIVISION [C.T.A. CASE NO. 10226. August 23, 2023.] STEFANINI PHILIPPINES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION REYES-FAJARDO , J p : Before the Court is a Petition for Review 1 filed by Stefanini Philippines, Inc. (petitioner or Stefanini Philippines) on December 16, 2019 against respondent Commissioner of Internal Revenue (CIR), seeking the refund of or issuance of a tax credit certificate (TCC) amounting to P9,632,173.66 representing alleged excess and/or unutilized input value-added tax (VAT) on purchases of goods and services attributable to zero-rated sales relative to the third and fourth quarters of calendar year (CY) 2017. ATICcS FACTS Stefanini Philippines is a corporation organized under Philippine law, with registered office address at 3, 5 & 6/F iMET BPO Metrobank Ave., Metropolitan Park, Roxas Blvd., Pasay City 1300. It is engaged in the business of providing business process outsource solutions and allied contact or call center services 2 to clients that include non-resident foreign entities such as Stefanini, Inc., Stefanini UK Ltd., Stefanini Srl, and Stefanini NV/SA. Respondent is the head of the Bureau of Internal Revenue (BIR) empowered to perform the duties of the office, including acting upon and approving claims for refund or tax credit. Its office address is at the 5th Floor, BIR National Office Building, BIR Road, Diliman, Quezon City. 3 Tax Returns 1) Output VAT For the third and fourth quarters of CY 2017, Stefanini Philippines filed 4 Quarterly Value-Added Tax Returns (BIR Form No. 2550-Q) and reported total sales of P359,176,890.35, which included zero-rated sales of P358,807,912.34 as follows: Period VATable Sales Zero-rated Sales Total Sales Third Quarter-2017 5 P221,514.41 P122,765,262.34 P122,986,776.75 Fourth Quarter-2017 6 147,463.60 236,042,650.00 236,190,113.60 Total P368,978.01 P358,807,912.34 P359,176,890.35 ================ ============= ============== ============== Correspondingly, Stefanini Philippines reported output VAT from its sales subject to VAT in the third and fourth quarters amounting to P26,581.73 7 and P17,695.63, 8 respectively. ETHIDa 2) Input VAT On the other hand, it also declared a total input VAT of P9,676,450.52 from its current domestic purchases of goods and services and input VAT on purchases of capital goods from previous quarters, detailed as follows: 3rd Qtr 2017 "P-80" 4th Qtr 2017 (Amended) "P-100" Total Input Tax Due on Capital Goods exceeding P1M Deferred from previous quarter P1,582,446.18 P1,498,163.00 P3,080,609.18 Purchase of Capital Goods Exceeding P1M - 1,195,413.26 1,195,413.26 Total P1,582,446.18 P2,693,576.26 P4,276,022.44 Less: Deferred for the succeeding period 1,498,163.36 2,602,771.62 4,100,934.98 Amortized input tax on capital goods exceeding P1M P84,282.82 P90,804.64 P175,087.46 Input Tax Due on Current Purchases of Goods other than Capital Goods Input tax on purchase of capital goods not exceeding P1M P141,177.60 P100,028.89 P241,206.49 Input tax on domestic purchases of goods other than capital goods 101,759.75 312,164.12 413,923.87 Sub-total P242,937.35 P412,193.01 P655,130.36 Input Tax Paid on: Input tax on domestic purchases of services P3,027,767.46 P5,818,465.24 P8,846,232.70 Sub-total P3,027,767.46 P5,818,465.24 P8,846,232.70 Total input tax during the period P3,354,987.63 P6,321,462.89 P9,676,450.52 ======================== =========== =========== =========== 3) VAT Payable On account of the excess of input over output VAT, Stefanini Philippines reported net VAT overpayment for the third and fourth quarters amounting to P54,951,712.80 9 and P61,255,480.42, 10 respectively. TIADCc Proceedings before the BIR On September 26, 2019 , Stefanini Philippines filed before the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914), 11 accompanied by a letter 12 of even date (administrative claim) . In the main, it averred as follows: First , it incurred excess and/or unutilized input VAT attributable to its zero-rated sales. Second , it is entitled to the refund or credit of excess input VAT arising from the third and fourth quarters of CY 2017 in the aggregate amount of P9,632,173.66. 13 The CIR 14 denied Stefanini Philippines's administrative claim. The latter received a copy of this denial on November 18, 2019 . Hence, it filed the present Petition for Review on December 16, 2019 (judicial claim) . 15 Proceedings before the Court The CIR filed an Answer 16 and submitted 17 the BIR Records of the case on March 2, 2020 and July 28, 2020, respectively. After the parties' submission of their respective pre-trial briefs 18 and the conduct of a pre-trial conference, 19 the Court resolved 20 to approve the parties' Joint Stipulation of Facts and Issues 21 and issued a Pre-Trial Order dated February 3, 2021. 22 During trial, the following persons testified for Stefanini Philippines: (1) Ms. Jeanina B. Pepito, 23 petitioner's Finance Manager, and (2) Mr. Joseph Cedric V. Calica, 24 the Court-commissioned Independent Certified Public Accountant (ICPA). 25 The Report of the ICPA was submitted on December 4, 2020. 26 Stefanini Philippines filed its Formal Offer of Evidence 27 on February 10, 2021. While the CIR filed a Comment 28 thereto, the Court expunged 29 the same for being filed out of time. Consequently, the Court resolved 30 to admit all exhibits offered by Stefanini Philippines. For its part, the CIR presented the testimony of Revenue Officer Dexter C. Bustillos. 31 Subsequently, the Court also admitted 32 all exhibits offered 33 by the CIR. After the parties filed their respective Memoranda, 34 the case was submitted for decision on August 23, 2022. 35 cSEDTC ISSUE The Court is tasked to ascertain Stefanini Philippines's entitlement to a refund or credit of alleged unutilized input VAT attributable to zero-rated sales relative to the third and fourth quarters of CY 2017. Petitioner's Arguments Stefanini Philippines anchors its claim for refund or credit on Sections 108 (B) (2) and 112 (A), in relation to Section 110 (B), of the National Internal Revenue Code (Tax Code). 36 It avers as follows: First , it is a VAT-registered taxpayer. 37 Second , the input VAT subject of the present claim was derived from purchases of goods and services attributable to zero-rated sales of services. 38 Third , said input VAT has remained unutilized and/or unapplied against its output VAT liability. 39 Fourth , it filed administrative and judicial claims within reglementary period prescribed by the Tax Code. 40 Respondent's Arguments On the other hand, the CIR insists that Stefanini Philippines failed to substantiate its claim for refund at the administrative level. 41 In particular, the CIR denied Stefanini Philippines's administrative claim because it did not comply with the mandatory invoicing requirements pursuant to Section 113 in relation to Section 110 of the Tax Code. 42 OUR RULING Stefanini Philippines's Petition for Review is partly meritorious. The Court may consider evidence not presented at the administrative level. The basic rule in tax refund cases requires the claimant to establish its entitlement to the refund or credit sought by showing that it has strictly complied with the conditions for its grant. 43 The claimant's burden consists of proving not only that it is entitled to a refund, but also that it observed the reglementary periods within which the administrative and judicial claims for refund must be filed. 44 Verily, the law authorizes the CIR to issue a TCC relative to or refund creditable input VAT due or paid attributable to zero-rated sales. 45 Thus, the CIR is given sufficient discretion to grant or deny the claim for refund or credit, after evaluating the claimant's submissions in support of its request. The CIR's denial is appealable to this Court. 46 On appeal, the claimant must convince the Court that the CIR's denial was not justified. It may re-submit the documents already presented to the CIR, as well as additional documents which may further bolster its entitlement to a refund or credit. Put in another way, "part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim." 47 AIDSTE Significantly, cases filed before this Court are litigated de novo . Thus, Our review shall not be "limited to whether or not the Commissioner committed gross abuse of discretion, fraud, or error of law, as contended by the Commissioner" and shall cover even the CIR's factual findings. 48 Accordingly, We are not foreclosed from considering the totality of the evidence offered by the claimant, whether or not submitted previously at the administrative level. Stefanini Philippines is entitled to a partial refund or credit. After a careful evaluation of the evidence offered in support of the instant judicial claim, We find in favor of granting Stefanini Philippines a refund or credit to the extent of P5,588,956.13. The recent case of Chevron Holdings, Inc. v. Commissioner of Internal Revenue 49 set out the requisites for a grant of refund or credit of unutilized input VAT attributable to zero-rated sales, viz. : Under Section 112 (A) of the Tax Code, the taxpayer may claim for refund or issuance of tax credit certificate of unutilized input VAT attributable to zero-rated sales subject to the following conditions: (1) the taxpayer is VAT-registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax. The concurrence of the above-enumerated conditions in the present case is discussed below. 1) VAT Registration Stefanini Philippines's VAT registration is established by its Certificate of Registration 50 with TIN 006-960-314-00000. 2) VAT Zero-rating Stefanini Philippines avers that the input VAT it seeks to refund is attributable to sales of services to its non-resident foreign clients, which they regard as subject to zero percent (0%) VAT, pursuant to Section 108 (B) (2) of the Tax Code, viz. : "Sec. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: SDAaTC (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) "; (Emphases supplied) The preliminary consideration for VAT zero-rating of a sale or supply of service is that it must have been performed in the Philippines . In this regard, it is already stipulated that Stefanini Philippines is engaged in the enterprise of providing business process outsource solutions and allied contact or call center services. 51 That these services were performed in the Philippines is supported by its Amended Articles of Incorporation, 52 BIR Certificates of Registration dated December 17, 2013 53 and January 18, 2018, 54 and Agreements for Services 55 with its respective clients, among others. In particular, these documents show that its registered address and principal place of business is in the Philippines. In Our view, that a corporation was incorporated in the Philippines and is registered herein are prima facie proofs that, necessarily, it conducts its business in the Philippines, where it resides and is registered. 56 Significantly, Stefanini Philippines's domestic registered address is no longer disputed, as this fact has been settled and accepted between the parties. 57 Sales or supplies of services performed in the Philippines may fall into two categories for purposes of zero-rating: export services under sub-paragraph (B) (1) ( e.g. , processing, manufacturing or repacking of goods intended for consumption outside the Philippines) and other services under sub-paragraph (B) (2) ( e.g. , sale or supply of services other than those referred to in sub-paragraph (B) (1)). In line with this, Stefanini Philippines submitted the following agreements indicating therein that the services to be provided, i.e. , "outsourced processing services to support [its clients'] internal operations and external customer contracts," viz. : 1. Agreement for Services between Stefanini, Inc. and petitioner made on January 1, 2015 and shall remain in force until April 30, 2018; 58 AaCTcI 2. Agreement for Services between Stefanini UK Ltd. and petitioner made on September 1, 2017 and shall remain in force until August 31, 2019; 59 3. Agreement for Services between Stefanini Srl and petitioner made on January 1, 2016 and shall remain in force until April 30, 2018; 60 and 4. Agreement for Services between Stefanini NV/SA and petitioner made on January 1, 2016 and shall remain in force until April 30, 2018. 61 These establish that Stefanini Philippines's services ( i.e. , outsourced business process services) are zero-rated sales or supplies of other services . Consequently, its services must meet the criteria set out in Section 108 sub-paragraph (B) (2). In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd. , 62 the Supreme Court enumerated the conditions under Section 108 (B) (1), viz. : Sales of "other services," such as those qualifying services rendered by DKS to its foreign affiliates-clients, shall be zero-rated pursuant to Section 108 (B) (2) of the Tax Code if the following conditions are met: First, the seller is VAT-registered . Second, the services are rendered "to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed." Third, the services are "paid for in acceptable foreign currency and accounted for in accordance with [BSP] rules and regulations." xxx xxx xxx Proof of NRFC Status For purposes of zero-rating under Section 108 (B) (2) of the Tax Code, the claimant trust establish the two components of a client's NRFC status, viz. : (1) that their client was established under the laws of a country not the Philippines or, simply, is not a domestic corporation; and (2) that it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof of both of these components: showing not only that the clients are foreign corporations, but also are not doing business in the Philippines. We find that Stefanini Philippines established its compliance with the aforementioned requisites. First , as discussed above, its VAT-registration is shown by its BIR Certificate of Registration . Second , to prove that the remittances it received as payments for the services rendered were in acceptable foreign currency and accounted for as required by applicable BSP rules, petitioner presented Certificates of Inward Remittance issued by the Bank of America, N.A. 63 and Metropolitan Bank & Trust Company. 64 In the issuance of invoices and receipts evidencing the subject sales and collections of remittances, Stefanini Philippines must also comply with the mandatory invoicing requirements laid out in Section 113 (A) and (B) of the Tax Code, 65 as further implemented by Section 4.113-1 (A) and (B) of Revenue Regulations (RR) No. 16-05. acEHCD In this regard, Stefanini Philippines submitted the following official receipts to support its reported zero-rated sales for the third and fourth quarters of CY 2017, to wit: Amount Exh. 66 OR No. Date Client Foreign Currency PhP 3rd Quarter "P-10" 117 07/12/2017 Stefanini, Inc. $200,000.00 P10,092,000.00 "P-11" 118 07/18/2017 Stefanini, Inc. $125,000.00 6,341,250.00 "P-12" 119 07/24/2017 Stefanini, Inc. $200,000.00 10,127,000.00 "P-13" 121 07/31/2017 Stefanini, Inc. $281,107.85 14,174,863.34 "P-14" 122 08/08/2017 Stefanini, Inc. $500,000.00 25,282,500.00 "P-15" 123 08/25/2017 Stefanini, Inc. $300,000.00 15,340,500.00 "P-16" 124 09/05/2017 Stefanini, Inc. $200,000.00 10,212,000.00 "P-17" 125 09/21/2017 Stefanini, Inc. $260,000.00 13,234,000.00 "P-18" 126 09/15/2017 Stefanini, Inc. $30,000.00 1,530,000.00 "P-19" 127 09/19/2017 Stefanini, Inc. $300,000.00 15,239,539.50 "P-20" 128 09/20/2017 Stefanini, Inc. $10,000.00 505,134.50 "P-21" 129 09/28/2017 Stefanini, Inc. $13,500.00 686,475.00 Subtotal P122,765,262.34 4th Quarter "P-22" 130 10/03/2017 Stefanini, Inc. $500,000.00 P25,450,000.00 "P-23" 131 10/10/2017 Stefanini, Inc. $30,000.00 1,539,000.00 "P-24" 132 10/19/2017 Stefanini, Inc. $320,000.00 16,483,200.00 "P-25" 133 11/08/2017 Stefanini, Inc. $400,000.00 20,542,000.00 "P-26" 134 11/17/2017 Stefanini, Inc. $365,000.00 18,512,800.00 "P-27" 135 11/17/2017 Stefanini UK Ltd. 50,987.39 3,414,115.63 "P-28" 136 11/20/2017 Stefanini NV/SA 260,000.00 15,475,200.00 "P-29" 138 12/04/2017 Stefanini, Inc. $160,000.00 8,064,800.00 "P-30" 139 12/06/2017 Stefanini, Inc. $500,000.00 25,315,000.00 "P-31" 140 12/07/2017 Stefanini Sarl Fr61,000.00 3,113,440.00 "P-32" 141 12/28/2017 Stefanini, Inc. $250,000.00 12,457,500.00 "P-33" 142 12/20/2017 Stefanini, Inc. $200,000.00 10,046,000.00 Subtotal P160,413,055.63 TOTAL P283,178,317.97 ============ Upon examination, We observe that each inward remittance is duly supported by VAT official receipts , all of which bear the information in accordance with the applicable invoicing requirements. To be sure, the amount collected was written and declared as "zero-rated sales" in the breakdown portion (left side) on the face of each official receipt. All collections are reflected clearly as zero-rated sales on the official receipts, in compliance with the applicable invoicing requirements and pursuant to applicable jurisprudence directing that the term "zero-rated sale" be written or printed prominently on the face thereof. EcTCAD We do note two (2) third quarter transactions where the amount of remittance received differed from the amount billed. Significantly, Stefanini Philippines submitted a reconciliation 67 where it was able to explain the nature of these discrepancies. 68 Third , that Stefanini Philippines's clients for whom it rendered the subject services are (a) non-resident foreign corporations (NRFC) (b) not engaged in trade or business in the Philippines are established by the SEC Certifications of Non-Registration and Proofs of Foreign Incorporation/Registration relative to each of its foreign clients, viz. : Company Name SEC Certification of Non-Registration of Company (Exhibit Ref) Proof of foreign incorporation/registration (Exhibit Ref) Stefanini, Inc. "P-57" 69 "P-61" to "P-61-A"; 70 "P-62" to "P-62-B"; 71 "P-66"; 72 "P-67" 73 Stefanini UK Ltd. "P-58" 74 "P-63" to "P-63-A"; 75 "P-116"; 76 "P-68"; 77 "P-69" 78 Stefanini Srl "P-59" 79 "P-65" to "P-65-A"; 80 "P-65-1"; 81 "P-65-A-1"; 82 "P-72"; 83 "P-73"; 84 "P-74" 85 Stefanini NV/SA "P-60" 86 "P-64" to "P-64-A"; 87 "P-117" 88 3) Timeliness of Administrative and Judicial Claims The present claim covers the third and fourth quarters of CY 2017. Counting two (2) years from the close of each of these quarters, respectively, the following table indicates the last day for filing of the administrative claim, viz. : VAT Return Close of the Quarter Last Day to File Administrative Claim 3rd quarter September 30, 2017 September 30, 2019 4th quarter December 13, 2017 December 31, 2019 It is clear from the foregoing that Stefanini Philippines's September 26, 2019 filing of its administrative claim was within the two (2)-year prescriptive period set out in Section 112 (A) of the Tax Code. Subsequently, however, the CIR denied the administrative claim. SDHTEC It is stipulated that Stefanini Philippines received a copy of the CIR's denial on November 18, 2019. 89 It then proceeded to this Court and filed the present judicial claim on December 16, 2019 . 90 Likewise, the judicial claim was timely as it was filed within the thirty (30)-day reglementary period counted from receipt of the CIR's decision. 4) Validity of unutilized input VAT Certainly, the input VAT subject of the claim must also be valid; that is, eligible for refund or credit in accordance with relevant Tax Code provisions and regulations. To be valid, the input VAT: (a) must not be transitional input taxes, 91 (b) must be due or paid 92 and substantiated by supporting documents that, in turn, meet the applicable VAT invoicing requirements, 93 (c) must be attributable to zero-rated or effectively zero-rated sales or supplies of service, 94 and (d) must not have been applied against output taxes during and in the succeeding quarters. 95 In the subject VAT returns, Stefanini Philippines declared input taxes in the aggregate amount of P9,676,450.52. Subject of the present claim is a total of P9,632,173.66 96 of the aforementioned amount. Stefanini Philippines's compliance with the above-enumerated requisites is discussed in detail below. Not transitional input VAT There is no showing that input VAT credits subject of the instant claim are transitional input VAT within the meaning of Section 111 (A) of the Tax Code. To be sure, the input VAT's non-transitional nature has not been put in issue nor questioned by the CIR. Actually due and paid; supported by VAT invoices and official receipts Only 57.84% 97 of the total input VAT reported in the returns was established to have been actually due or paid . Whether input VAT was due or paid is conditioned upon the presentation of documents that (a) substantiate the amount of input tax credits, as prescribed under Section 4.110-8 of RR No. 16-2005, and (b) comply with the invoicing requirements under Sections 113 (A) and (B), 237 and 238 of the Tax Code, and implemented by Section 4.113-1 (A) and (B) of RR No. 16-2005. Here, Stefanini Philippines submitted VAT invoices and official receipts to support its input taxes from domestic purchases of goods and services for the third and fourth quarters of CY 2017. A careful examination of these documents reveals that input taxes amounting to P4,079,860.46 are not supported properly and, thus, should be disallowed, viz. : HSAcaE Third Quarter Supplier ^ Exh. No. Date Invoice/OR Amount Input Tax Purchase of goods other than capital goods Address, business style and/or TIN of petitioner not indicated in invoice Brother's Venture P-91-A-23 07/26/2017 P56,760.00 P6,081.43 Brother's Venture P-91-A-25 07/28/2017 22,500.00 2,410.71 Brother's Venture P-91-A-27 08/23/2017 75,000.00 8,035.71 Pacsports a P-91-A-247 08/18/2017 11,970.00 1,282.50 Subtotal P166,230.00 P17,810.35 Invoice dated outside period of claim Synergenius, Inc. P-91-A-341 06/08/2017 P41,810.72 P4,479.72 Unison b P-91-A-347 05/17/2017 3,311.41 354.79 Unison P-91-A-349 05/19/2017 29,926.40 3,206.40 Unison P-91-A-351 05/19/2017 7,481.60 801.6 Unison P-91-A-353 06/19/2017 5,465.60 585.6 Unison P-91-A-355 05/19/2017 2,744.00 294 Unison P-91-A-357 06/01/2017 29,926.40 4,382.40 Unison P-91-A-362 06/01/2017 7,481.60 801.6 Unison P-91-A-364 06/01/2017 10,931.20 1,171.20 Unison P-91-A-366 06/06/2017 2,240.00 240 Unison P-91-A-368 06/13/2017 5,376.00 576 Unison P-91-A-370 06/13/2017 4,760.00 510 Unison P-91-A-372 06/23/2017 5,465.60 585.6 Unison P-91-A-374 06/29/2017 5,488.00 588 Unison P-91-A-376 06/29/2017 2,744.00 294 Subtotal P165,152.53 P18,870.91 Disallowed input taxes from purchase of goods other than capital goods P36,681.26 Purchase of capital goods not exceeding P1 Million Undated invoice Hi-End Office Design c P-91-B-2 P574,560.00 P61,560.00 Disallowed input taxes from purchase of capital goods not exceeding P1 Million 61,560.00 Purchase of services OR dated outside period of claim Pacita R. Salceda P-91-A-21 03/09/2017 P6,000.00 P642.86 Subtotal P642.86 VAT not separately indicated in the supporting OR Corpnet Global d P-91-A-106 08/30/2017 P31,350.00 P3,420.00 Corpnet Global P-91-A-108 09/18/2017 49,500.00 5,400.00 Extra Ordinaire e P-91-A-131 07/24/2017 112,450.46 11,482.17 Extra Ordinaire P-91-A-133 07/24/2017 85,517.99 8,544.08 Extra Ordinaire P-91-A-135 09/11/2017 84,417.72 8,424.05 Extra Ordinaire P-91-A-137 09/11/2017 105,835.84 10,760.57 Kalibrr Technology f P-91-A-236 07/12/2017 28,325.00 3,090.00 Kalibrr Technology P-91-A-240 09/22/2017 28,325.00 3,090.00 Phil. Vending Corp. g P-91-A-298 08/04/2017 18,177.50 1,983.00 Phil. Vending Corp. P-91-A-300 08/04/2017 61,769.91 6,738.54 Phil. Vending Corp. P-91-A-302 09/08/2017 8,672.32 946.07 Ricoh (Phil.), Inc. P-91-A-314 08/17/2017 11,894.20 1,333.93 Ricoh (Phil.), Inc. P-91-A-316 08/17/2017 11,894.20 1,333.93 Ricoh (Phil.), Inc. P-91-A-318 08/17/2017 11,894.20 1,333.93 Ricoh (Phil.), Inc. P-91-A-320 08/17/2017 11,894.20 1,333.93 Ricoh (Phil.), Inc. P-91-A-322 08/17/2017 11,894.20 1,333.93 Ricoh (Phil.), Inc. P-91-A-324 08/17/2017 8,894.33 970.29 Ricoh (Phil.), Inc. P-91-A-326 08/17/2017 11,989.72 1,344.64 Ricoh (Phil.), Inc. P-91-A-328 08/17/2017 47,926.82 5,228.38 Ricoh (Phil.), Inc. P-91-A-330 08/17/2017 40,014.63 4,365.23 Ricoh (Phil.), Inc. P-91-A-332 08/17/2017 35,143.17 3,833.80 Ricoh (Phil.), Inc. P-91-A-334 08/17/2017 44,021.80 4,802.38 Subtotal P861,803.21 P91,092.85 Input VAT on purchases of services not supported by OR B&T Law Offices P-91-A-76 09/05/2017 P19,734.50 P1,800.00 Hi-End Office Design P-91-A-205 07/24/2017 933,336.25 101,818.50 Hi-End Office Design P-91-A-207 08/11/2017 933,336.25 101,818.50 PLDT h P-91-A-249 08/16/2017 175,558.20 19,151.80 PLDT P-91-A-252 08/16/2017 216,805.89 23,651.55 PLDT P-91-A-254 08/16/2017 99,933.04 10,901.79 PLDT P-91-A-257 09/04/2017 143,000.00 15,600.00 PLDT P-91-A-259 09/04/2017 99,933.04 10,901.79 PLDT P-91-A-261 09/04/2017 4,483.77 489.03 PLDT P-91-A-263 09/04/2017 4,483.77 489.03 PLDT P-91-A-265 10/12/2017 165,548.06 18,059.79 Wellthy Solutions, Inc. P-91-A-405 07/21/2017 9,630.00 1,080.00 Wellthy Solutions, Inc. P-91-A-407 09/25/2017 9,630.00 1,080.00 Wellthy Solutions, Inc. P-91-A-409 08/22/2017 9,630.00 1,080.00 Subtotal P2,825,042.77 P307,921.78 No supporting documents Intellicare P48,563.50 P5,827.62 Ricoh (Phil.), Inc. 11,205.33 1,344.64 Ricoh (Phil.), Inc. 7,664.33 919.72 Ricoh (Phil.), Inc. 45,477.00 5,457.24 Subtotal P112,910.16 P13,549.22 With discrepancy in amount of input tax claim against OR amount Claim Should be Difference Federal Land i P-91-A-143 P83,783.70 P82,287.56 P1,496.14 Federal Land P-91-A-145 361,067.71 344,948.62 16,119.09 Subtotal P444,851.41 P427,236.18 P17,615.23 Disallowed input taxes from purchase of services P430,821.94 Purchase of capital goods with amortized input tax Invoice has no BIR Authority to Print Input Tax Recognized Life (in months) Amortized Input Tax for the Qtr. Westcon Solutions j P-91-C-10 P12,953.16 60 P647.66 Disallowed input taxes from purchase of capital goods with amortized input tax P647.66 Total disallowed input taxes for the Third Quarter P529,710.86 ===================== ========== ========= ========== ========= Fourth Quarter Invoice/OR Supplier Exh. No. Date Amount Input Tax Purchase of goods other than capital goods Address, business style and/or TIN of petitioner not indicated in invoice Beyond the Ground k P-91-A-443 11/23/2017 P330,568.00 P35,418.00 Brother Venture l P-91-A-445 11/06/2017 29,248.00 3,133.71 Brother Venture P-91-A-447 11/10/2017 35,700.00 3,825.00 Brother Venture P-91-A-449 11/23/2017 50,220.00 5,380.71 Brother Venture P-91-A-451 11/23/2017 58,720.00 6,291.43 Brother Venture P-91-A-453 09/18/2017 92,000.00 9,857.14 Brother Venture P-91-A-455 10/04/2017 37,800.00 4,050.00 Brother Venture P-91-A-457 10/25/2017 43,660.03 4,677.86 GNS, Inc. m P-91-A-547 10/12/2017 1,680.00 180 Gem Stationary, Inc. P-91-A-557 09/07/2017 27,089.06 2,902.40 Gem Stationary, Inc. P-91-A-559 09/08/2017 34,655.00 3,713.04 Gem Stationary, Inc. P-91-A-561 09/18/2017 8,000.00 857.14 Gem Stationary, Inc. P-91-A-563 09/25/2017 36,230.00 3,881.79 Gem Stationary, Inc. P-91-A-565 09/30/2017 4,981.00 533.68 Gem Stationary, Inc. P-91-A-569 10/04/2017 40,550.00 4,344.64 Gem Stationary, Inc. P-91-A-571 10/05/2017 2,500.00 267.86 Gem Stationary, Inc. P-91-A-573 11/04/2017 25,455.00 2,727.32 Gem Stationary, Inc. P-91-A-575 11/27/2017 39,629.99 4,246.07 Gem Stationary, Inc. P-91-A-577 12/27/2017 30,647.00 3,283.61 Gem Stationary, Inc. P-91-A-579 11/27/2017 29,237.00 3,186.11 Promocentral, Inc. P-91-A-697 12/15/2017 509,091.52 54,545.52 Subtotal P1,467,661.60 P157,303.03 No supporting documents Star Appliance Ctr. P10,114.29 Subtotal P10,114.29 With discrepancy in amount of input tax claim and invoice amount Claim Should be Difference Mercury Drug Corp. P-91-A-669 P7,897.18 P5,691.64 P2,205.54 Subtotal P2,205.54 Disallowed input taxes from purchase of goods other than capital goods P169,622.86 Purchase of services OR dated outside period of claim AGL Phils., Inc., n P-91-A-411 03/09/2018 P79,284.16 P300.00 AGL Phils., Inc. P-91-A-412 03/09/2018 11,000.00 1,200.00 AGL Phils., Inc. P-91-A-413 01/23/2018 220,442.44 1,200.00 AGL Phils., Inc. P-91-A-414 01/23/2018 30,543.23 300 ANSI Services, Inc. o P-91-A-429 01/09/2018 480,716.24 9,456.73 ANSI Services, Inc. P-91-A-431 01/09/2018 483,438.52 9,510.27 ADI, Inc. p P-91-A-433 01/08/2018 127,742.41 13,935.54 B&T Law Offices q P-91-A-458 01/16/2018 1,344.00 144 B&T Law Offices P-91-A-459 01/10/2018 1,344.00 144 B&T Law Offices P-91-A-460 01/16/2018 1,680.00 180 B&T Law Offices P-91-A-461 01/10/2018 1,344.00 144 B&T Law Offices P-91-A-462 01/10/2018 4,256.00 456 B&T Law Offices P-91-A-484 01/10/2018 11,200.00 1,200.00 B&T Law Offices P-91-A-486 01/30/2018 231,168.00 24,768.00 Corpnet Global r P-91-A-493 01/09/2018 30,250.00 3,300.00 Corpnet Global P-91-A-495 02/07/2018 44,000.00 4,800.00 Extra Ordinaire P-91-A-505 01/10/2018 107,449.72 10,936.63 Extra Ordinaire P-91-A-506 01/10/2018 273,647.76 27,176.97 Fedex Pacific, LLC s P-91-A-508 01/08/2018 2,732.42 298.1 Fedex Pacific, LLC P-91-A-510 01/08/2018 3,264.79 356.15 Federal Land P-91-A-534 01/09/2018 810,759.85 88,446.53 Federal Land P-91-A-536 01/09/2018 10,747,022.22 1,205,273.52 FP Philippines, Inc. P-91-A-538 01/12/2018 74,637.56 8,142.28 Globe Telecom P-91-A-580 02/14/2018 19,699.04 2,198.05 Glocal Manpower t P-91-A-609 01/17/2018 52,635.76 5,808.47 Glocal Manpower P-91-A-611 01/09/2018 55,325.63 5,837.99 Glocal Manpower P-91-A-613 02/01/2018 105,971.92 11,573.85 HTECH Corp. P-91-A-623 01/10/2018 165,000.00 18,000.00 Intellicare P-91-A-629 02/01/2018 17,936.60 1,956.72 Intellicare P-91-A-630 02/01/2018 19,566.40 2,134.52 Intellicare P-91-A-633 01/16/2018 15,597.06 1,701.50 Intellicare P-91-A-634 01/16/2018 18,667.72 2,036.47 Intellicare P-91-A-635 01/16/2018 82,685.33 9,020.22 Jai N Jio Canteen P-91-A-642 01/19/2018 93,303.57 10,178.57 Jones Lang LaSalle u P-91-A-647 01/12/2018 10,890.00 1,188.00 Jones Lang LaSalle P-91-A-649 01/12/2018 183,788.00 20,049.60 Jones Lang LaSalle P-91-A-651 01/12/2018 127,530.98 13,912.47 Jones Lang LaSalle P-91-A-653 01/12/2018 10,890.00 1,188.00 Lane Archive Tech. P-91-A-664 01/23/2018 1,144.00 124.8 PLDT P-91-A-670 01/30/2018 443,288.03 48,358.69 RCW Construction v P-91-A-700 05/02/2017 33,994.40 3,708.48 RCW Construction P-91-A-712 02/14/2018 37,818.00 4,125.60 RCW Construction P-91-A-714 02/14/2018 84,921.10 9,264.12 Ricoh (Phils.), Inc. P-91-A-724 01/15/2018 4,673.07 509.79 Ricoh (Phils.), Inc. P-91-A-726 01/15/2018 63,765.31 7,151.25 SGV & CO P-91-A-729 01/30/2018 304,858.01 298.1 Wellthy Solutions P-91-A-857 01/19/2018 9,630.00 1,080.00 Wellthy Solutions P-91-A-863 01/19/2018 9,630.00 1,080.00 Subtotal P15,752,477.25 P1,594,153.98 VAT not separately indicated in the supporting OR BDD, Inc. w P-91-A-487 12/11/2017 P275,000.00 P21,428.57 BDD, Inc. P-91-A-488 10/20/2017 196,428.57 30,000.00 Corpnet Global P-91-A-491 11/22/2017 40,490.65 4,417.16 Jai N Jio Canteen P-91-A-636 10/26/2017 11,000.00 1,200.00 Jai N Jio Canteen P-91-A-638 10/26/2017 116,875.00 12,750.00 Jai N Jio Canteen P-91-A-640 11/23/2017 38,696.43 4,221.43 Krishna Po P-91-A-657 11/23/2017 18,190.00 2,040.00 RCW Construction P-91-A-716 12/28/2018 9,292,572.78 1,013,735.21 Subtotal P9,989,253.43 P1,089,792.37 Input VAT on purchases of services not supported by OR PLDT P-91-A-690 11/29/2017 P454,291.65 P49,559.09 PLDT P-91-A-693 11/29/2017 537,880.00 58,677.82 Wellthy Solutions P-91-A-861 01/10/2017 9,630.00 1,080.00 Subtotal P1,001,801.65 P109,316.91 No supporting documents Adventure Int'l. x P3,000.00 P360.00 B&T Law Offices 2,400.00 288.00 Diversfy 154,305.50 18,516.66 Federal Land 2,739,258.00 328,710.96 Federal Land 775,136.00 93,016.32 Globe Telecom 119,769.25 14,372.31 Ricoh (Phils.), Inc. 26,464.42 3,175.73 Ricoh (Phils.), Inc. 11,084.92 1,330.19 Subtotal P3,831,418.09 P459,770.17 With discrepancy in amount of input tax claim and OR amount Claim Should be Difference Extra Ordinaire P-91-A-499 P25,501.63 P4,658.26 P20,843.37 Extra Ordinaire P-91-A-501 25,753.75 4,730.29 21,023.46 Extra Ordinaire P-91-A-503 26,331.11 4,808.49 21,522.62 Federal Land P-91-A-516 123,808.80 123,797.73 11.07 Federal Land P-91-A-518 1,680.00 1,679.06 0.94 Federal Land P-91-A-520 3,600.00 3,598.09 1.91 Federal Land P-91-A-524 85,719.00 85,650.53 68.47 Seafood Ventures P-91-A-728 20,271.43 5,000.00 15,271.43 W&I Ins. Brokers, Inc. y P-91-A-865 57,722.85 9,620.47 48,102.38 Subtotal P370,388.57 P243,542.92 P126,845.65 Disallowed input taxes from purchase of services P3,379,879.08 Purchase of capital goods with amortized input tax Invoice has no BIR Authority to Print Input Tax Recognized Life Amortized Input Tax for the Qtr. Westcon Solutions z P-91-C-10 P12,953.16 60 months P647.66 Disallowed input taxes from purchase of capital goods with amortized input tax P647.66 Total disallowed input taxes for the Fourth Quarter P3,550,149.60 TOTAL DISALLOWED INPUT TAXES P4,079,860.46 ===================== ========== ========= =========== ========== ^ Supplier names that have been abbreviated in the table above are shown in full below. a PACSPORTS PHILS., INC. b Unison Computer Systems, Inc. c Hi-End Office Design Corporation d Corpnet Global Corporation e Extra Ordinaire & Manpower Services, Inc. f Kalibrr Technology Ventures, Inc. g Philippine Vending Corporation h Philippine Long Distance Telephone Company i Federal Land, Inc. (formerly Philippine Securities Corporation) j Westcon Solutions Philippines, Inc. k Beyond The Ground Commodities, Inc. l Brother Venture Trading Corp. m Gateway Network Solutions (GNS), Inc. n Able Global Logistics Philippines, Inc. o All Nation Security & Investigation Services, Inc. p Analytics and Data Integrity, Inc. q Buan & Temprosa Law Offices r Corpnet Global Corporation s Federal Express Pacific, LLC t Global Manpower Supply & Services u Jones Lang LaSalle (Philippines), Inc. v RCW Construction Development Corporation w Buffet Dining Destination, Inc. x Adventure International Tours, Inc. y Winebrenner & Inigo Insurance Brokers, Inc. z Westcon Solutions Philippines, Inc. Resultantly, only input VAT amounting to P5,596,590.06 out of the P9,676,450.52 declared in the return shall be considered valid, viz. : AScHCD Third Qtr. Fourth Qtr. Total Input taxes Per VAT Returns P3,354,987.63 P6,321,462.89 P9,676,450.52 Less: Disallowed 529,710.86 3,550,149.60 4,079,860.46 Valid input taxes P2,825,276.77 P2,771,313.29 P5,596,590.06 ================ =========== =========== =========== Attributable to zero-rated sales Only 99.86% 98 of the valid input VAT computed above is attributable to zero-rated sales and, thus, eligible for refund. When the claimant was engaged in both VAT-able or zero-rated sales and input taxes due or paid cannot be attributed directly and entirely to either type of activity, it shall be allocated proportionately based on sales volume. 99 In the subject taxable quarters, Stefanini Philippines was engaged in both VAT-able and zero-rated sales. Furthermore, its input taxes were not shown to be attributable exclusively to either activity. Thus, the amount of P5,596,590.06 of valid input VAT computed above shall be apportioned between the two activities per quarter, viz. : Third Quarter Fourth Quarter Total VAT-able Sales P221,514.41 P147,463.62 add Zero-rated Sales 122,765,262.34 236,042,650.00 Total Sales 122,986,776.75 236,190,113.62 Zero-rated Sales P122,765,262.34 P236,042,650.00 P283,178,317.97 Divided by Total Sales 122,986,776.75 236,190,113.62 Percentage 99.82% 99.94% Valid Input VAT P2,825,276.77 P2,771,313.29 P5,596,590.06 Attributable to: Zero-rated sales* P2,820,188.10 P2,769,583.03 P5,589,771.14 =================== ============= ============= ============== VAT-able sales P6,818.92 * Eligible for refund Based on the foregoing, Stefanini Philippines' total valid input taxes attributable to zero-rated sales amounts to P5,589,771.14 . HESIcT Not applied against output tax during the third and fourth quarters of CY 2017 To recall, in the present case, Stefanini Philippines' claim for refund amounted to P9,632,173.16 resulted from offsetting the output tax on VAT-able sales against available input taxes for the third and fourth quarters of CY 2017, respectively, computed 100 as follows: Third Quarter Fourth Quarter Total Input tax on: Capital Goods exceeding P1M (amortized portion) 101 P84,282.82 P90,804.64 Current Purchases of Goods other than Capital Goods 102 242,937.35 412,193.01 Domestic purchases of services 103 3,027,767.46 5,818,465.24 Input tax attributable to zero-rated sales, per VAT returns P3,354,987.63 P6,321,462.89 P9,676,450.52 Less Output tax still due 104 26,581.73 17,695.63 44,277.36 Input tax sought to be refunded P3,328,405.90 P6,303,767.26 P9,632,173.16 ====================== ========== =========== =========== Significantly, the amount claimed consists only of (a) the amortized portion of input tax on capital goods exceeding P1 million, (b) input tax on current purchases of goods other than capital goods, and (c) input tax on domestic purchases of services. Stefanini Philippines does not seek to refund the amount of input taxes carried over from previous periods. 105 It is clear from the foregoing that the amount herein claimed is already net of the output tax reported during the subject quarters. Not applied against output tax in any subsequent period Further, based on the observations detailed below, We also find that the subject claim was not applied against any output taxes in succeeding periods . First , the balance of input taxes carried over from previous periods as of January 1, 2018 106 amounted to P61,255,480.06, computed as follows: AcICHD Input taxes carried over from previous periods, beginning Balance, June 30, 2017 P51,623,306.90 Third Quarter 2017 P3,328,405.90 Fourth Quarter 2017 6,303,767.26 9,632,173.16 Balance, December 31, 2017 P61,255,480.06 ===================== ========== =========== Second , from the first quarter of CY 2018 ( i.e. , beginning January 1, 2018) to the second quarter of CY 2019 ( i.e. , ending June 30, 2019) , Stefanini Philippines accumulated input taxes from domestic purchases amounting to P21,311,658.19, computed as follows: Input taxes from domestic purchases Goods Services Gross Unamortized Amortized Total A B C D E=CD A+B+E 2018 Q1 107 P113,977.00 P2,954,944.44 P2,602,771.56 P2,425,659.57 P177,111.99 P3,246,033.43 Q2 108 560,283.43 1,991,569.64 2,425,659.93 2,248,548.29 177,111.64 2,728,964.71 Q3 109 900,932.54 3,305,323.69 2,248,548.29 2,590,651.08 (342,102.79) 3,864,153.44 Q4 110 888,026.67 2,473,431.57 2,590,651.07 2,364,782.21 225,868.86 3,587,327.10 2019 Q1 111 1,530,940.32 4,008,699.57 2,364,782.21 3,244,443.72 (879,661.51) 4,659,978.38 Q2 112 358,397.05 2,532,918.72 3,244,443.73 2,910,558.37 333,885.36 3,225,201.13 P21,311,658.19 ============ Third , having regard to the first and second observations detailed above, the balance of input taxes carried over from previous periods as of June 30, 2019 amounted to P82,567,138.25, computed as follows: Input taxes carried over from previous periods, ending Balance, January 1, 2018 P61,255,480.06 add Input taxes from current transactions 21,311,658.19 Balance, June 30, 2019 P82,567,138.25 ================================ ============ Fourth , from the first quarter of CY 2018 ( i.e. , beginning January 1, 2018) to the second quarter of CY 2019 ( i.e. , ending June 30, 2019) , Stefanini Philippines incurred output taxes amounting to P1,567,724.08, computed as follows: Output taxes 113 2018 First quarter P88,627.92 Second quarter 22,646.06 Third quarter 79,547.60 Fourth quarter 107,124.89 2019 First quarter 340,528.32 Second quarter 929,249.29 Total P1,567,724.08 ================================ =========== Fifth , in the quarterly VAT returns from the first quarter of CY 2018 ( i.e. , beginning January 1, 2018) to the second quarter of CY 2019 ( i.e. , ending June 30, 2019) , Stefanini Philippines applied the aforementioned output taxes against the outstanding balance of input taxes carried over from previous periods. Thus, after application, the net balance of input taxes amounted to P80,999,414.17, computed as follows: caITAC Input taxes carried over from previous periods, net of output Balance, June 30, 2019 P82,567,138.25 less Output taxes incurred 1,567,724.08 Balance, net of output taxes P80,999,414.17 ================================ ============== Sixth , in its fourth quarterly VAT return for CY 2018 and second quarterly VAT return for CY 2019, Stefanini Philippines carved out from the balance of its input taxes the amounts of P11,857,373.50 114 and P15,210,089.68, 115 respectively. According to the testimony 116 of Jeanina B. Pepito, Finance Manager, Stefanini Philippines, the amount of P15,210,089.68 pertained to the aggregate amount of input taxes relative to the second, third, and fourth quarters of CY 2017, 117 for which Stefanini Philippines has sought a refund, viz. : Claim for refund, input taxes pertaining to CY 2017 Second quarter CTA Case No. 10188 118 P5,577,917.98 Third quarter Present claim 3,328,405.90 Fourth quarter Present claim 6,303,767.26 Per verification P15,210,091.14 Per VAT return, Q2 CY 2019 15,210,089.68 Variance P1.46 ================================ ============ Seventh , after removing the amounts that Stefanini Philippines claimed as refunds, the balance of allowable input taxes as of June 30, 2019 amounted to P53,931,950.99, computed as follows: TAIaHE Allowable input taxes, as of June 30, 2019 Balance, net of output taxes P80,999,414.17 less Amounts carved out Per Q4 CY 2018 VAT return P11,857,373.50 Per Q2 CY 2019 VAT return 15,210,089.68 27,067,463.18 Allowable input taxes P53,931,950.99 ========================= ============ ============= Based on the foregoing, Stefanini Philippines's balance of input taxes available for utilization was more than sufficient to cover all of the output taxes it incurred from January 1, 2018 to June 30, 2019 ( i.e. , third and fifth observations). Further, as of June 30, 2019, it already carved out/removed from the balance of input taxes available for utilization the amount claimed as refund in the instant case ( i.e. , sixth and seventh observations). These observations are consistent with the ICPA's findings. 119 Thus, We are convinced that the input taxes sought to be refunded in the present case were not utilized or applied against output taxes in any given taxable period . Computation of refundable unutilized or excess input taxes We proceed to the determination of the refundable amount of unutilized or excess input taxes attributable to petitioner's zero-rated sales. To recall, petitioner declared total zero-rated sales in its Quarterly VAT Returns in the aggregate amount of P358,807,912.34. However, only the zero-rated sales in the amount of P283,178,317.97 is properly supported by official receipts and proof of inward remittances. In short, only a portion of petitioner's declared zero-rated sales qualifies as valid zero-rated sales: 3rd Quarter 4th Quarter Total Valid zero-rated sales P122,765,262.34 P160,413,055.63 P283,178,317.97 Divided by Declared zero-rated sales P122,765,262.34 P236,042,650.00 P358,807,912.34 Percentage 100.0000% 67.9594% Consequently, out of the valid input taxes of P5,552,312.70, only the remaining valid input VAT of P4,670,035.76 is attributable to petitioner's valid zero-rated sales for the 3rd and 4th quarters of CY 2017, as computed below, and thus, must be refunded in favor of petitioner: ICHDca 3rd Quarter 4th Quarter Total Excess/unutilized input tax attributable to declared zero-rated sales P2,798,695.04 P2,753,617.66 P5,552,312.70 Multiplied by Percentage of valid zero-rated sales 100.0000% 67.9594% Refundable input taxes attributable to valid zero-rated sales P2,798,695.04 P1,871,340.72 P4,670,035.76 In sum, while Stefanini Philippines ably demonstrated that the amount claimed had not been utilized previously, We grant the claim only to the extent that it represents input taxes eligible for refund ( i.e. , demonstrated to be actually due and paid, properly substantiated, and attributable to zero-rated sales). Thus, We determine that Stefanini Philippines shall be entitled to a refund of P4,670,035.76 . WHEREFORE , the instant Petition for Review is PARTIALLY GRANTED . Accordingly, respondent is DIRECTED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE in favor of petitioner in the amount P4,670,035.76, representing its unutilized input VAT attributable to its zero-rated sales for the third and fourth quarters of CY 2017. SO ORDERED. (SGD.) MARIAN IVY F. REYES-FAJARDO Associate Justice Catherine T. Manahan, J. , concurs. Roman G. del Rosario, P.J. , with due respect, please see dissenting opinion. Separate Opinions DEL ROSARIO , P.J., dissenting opinion : With utmost respect, I am constrained to withhold my assent on the ponencia which partially grants the Petition for Review and orders the refund or issuance of tax credit certificate in petitioner's favor in the amount of P4,670,035.76. I submit that petitioner's refund claim should be denied for its failure to comply with the invoicing requirements under the law. Section 113 (B) (2) (c) and (d) of the National Internal Revenue Code (NIRC) of 1997, as amended, reads: cDHAES "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons . xxx xxx xxx (B) Information Contained in the VAT Invoice or VAT Official Receipt . The following information shall be indicated in the VAT invoice or VAT official receipt: xxx xxx xxx (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. Provided, That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt . (d) If the sale involved goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided , That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. x x x" (Boldfacing supplied) The above provision is implemented by Section 4.113-1 of Revenue Regulations (RR) No. 16-2005, as amended, which reads: "SEC. 4.113-1. Invoicing Requirements. xxx xxx xxx (B) Information contained in VAT invoice or VAT official receipt. The following information shall be indicated in VAT invoice or VAT official receipt: xxx xxx xxx (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt ; TCAScE (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale." (Boldfacing supplied) Verily, it is a requirement that for any VAT invoice or official receipt evidencing a zero-rated transaction, the term "zero-rated sale" should be written or printed prominently thereon. Failure to comply with the invoicing requirements is sufficient ground to deny the claim for refund or tax credit. 1 The Supreme Court has settled, in a number of cases, 2 that the writing or imprinting of the term "zero-rated sale" on the VAT invoice or official receipt is indispensable for a valid claim of refund of unutilized input tax. Such requirement was traced by the Supreme Court from Section 4.108-1 of RR No. 7-95, which has been incorporated in Section 113 (B) (2) (c) of the NIRC of 1997, as amended, by virtue of the amendments introduced by Republic Act No. 9337, which confirms the validity of the imprinting requirement on VAT invoices or official receipts. 3 Revenue Memorandum Circular No. 42-2003 provides that if the refund claim is based on the existence of zero-rated sales but the taxpayer fails to comply with the invoicing requirements, such claim should be denied, viz. : "Q-13: Should penalty be imposed on TCC application for failure of claimant to comply with certain invoicing requirements, ( e.g. , sales invoices must bear the TIN of the seller)? A-13: Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant. If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices ( e.g. , failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales . Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer." (Boldfacing and underscoring supplied) There is no reason to depart from the consistent ruling of the Supreme Court that a refund claimant's alleged zero-rated sales must also comply with the invoicing requirements under Section 113 of the NIRC of 1997, as amended. ASEcHI In this case, all of petitioner's alleged zero-rated sales, evidenced by VAT official receipts, 4 do not bear the term "zero-rated sale" written or printed prominently on such receipts. The ponencia reasons that the amount collected by petitioner from its alleged VAT zero-rated sales was written and declared as "zero-rated sales" in the breakdown portion on the left side of each face of the VAT official receipts, as shown in the following sample exhibits: Exhibit "P-10" Exhibit "P-33" The ponencia 's proposition is flawed. The information necessary to be indicated in the "breakdown" and the writing or imprinting of "zero-rated sales" on the VAT official receipts are requirements governed by separate provisions of the NIRC of 1997, as amended that is, Section 113 (B) (2) (c), which provides for the imprinting requirement, and Section 113 (B) (2) (d), which requires the breakdown of sales as VATable, VAT-exempt or VAT zero-rated in case of mixed transactions. In other words, notwithstanding that petitioner indicated in the breakdown of the VAT official receipts the amount pertaining to "zero-rated sales," such however is not tantamount to compliance with the imprinting requirement. The samples above show that petitioner failed to comply with the mandatory requirement of imprinting the term "zero-rated sales." cTDaEH Tax refunds are in the nature of a claim for exemption and the law is construed in strictissimi juris against the taxpayer. The pieces of evidence presented entitling a taxpayer to exemption are also strictissimi scrutinized and must be duly proven. 5 Thus, for failure of petitioner to comply with the invoicing requirements for its alleged zero-rated sale of services, the refund claim should be denied. ALL TOLD, I VOTE to DENY the Petition for Review for lack of merit. Footnotes 1. Docket Vol. I, pp. 6-13. 2. Par. 1.1, Stipulation of Facts, Compliance dated October 1, 2020, Docket Vol. I, p. 298. 3. Par. 2, Stipulation of Facts, Compliance dated October 1, 2020, Docket Vol. I, pp. 298 to 299. 4. Petitioner amended its VAT return for the fourth quarter on April 14, 2018. 5. Exhibit "P-80", Lines 115 to 19, Docket Vol. II, p. 1128. (Note: Zero-rated sales were reported as Exempt sales.) 6. Exhibit "P-100", Lines 15 to 19, Docket Vol. I, p. 471. 7. Exhibit "P-80", Line 15B, Docket Vol. II, p. 1128. 8. Exhibit "P-81", Line 15B, Docket Vol. II, p. 1130. 9. Exhibit "P-80", Line 29 Vol. II, p. 1129. 10. Exhibit "P-81", Line 29 Vol. II, p. 1131. 11. Exhibit "P-89", Docket Vol. II, p. 1156. 12. Exhibit "P-88", Docket Vol. II, pp. 1153 to 1155. 13. With P0.50 discrepancy against the total per VAT Returns. 14. Through a letter dated October 29, 2019 issued by the BIR, through Ms. Maria Luisa I. Belen, OIC-Assistant Commissioner (ACIR)-Assessment Service. Exhibits "P-118" to "P-118-A-1", Docket Vol. II, pp. 658 to 668. 15. Docket Vol. I, pp. 6 to 16. 16. Docket Vol. I, pp. 62 to 71. 17. Compliance dated July 27, 2020, Docket Vol. I, pp. 79 to 80. 18. For the CIR, see Docket Vol. I, pp. 88 to 92; For Stefanini Philippines, see Docket Vol. I, pp. 103 to 117. 19. Notice of Resetting dated June 30, 2020, Docket Vol. I, p. 77; Minutes of the hearing held on, and Order dated, September 24, 2020, Docket Vol. I, pp. 287 to 290, and 292 to 293, respectively. 20. In a Resolution dated October 19, 2020. Docket Vol. I, p. 332. 21. Docket Vol. I, pp. 298 to 309. 22. Docket Vol. II, pp. 952 to 973. 23. Exhibit "P-90", Docket Vol. I, pp. 118 to 138; Exhibit "P-119", Docket Vol. II, pp. 646 to 651; Minutes of the hearing held on January 21, 2021, Docket Vol. II [last four (4) pages thereof]; Order dated January 21, 2021, Docket Vol. II, pp. 944 to 945. 24. Exhibit "P-120", Docket Vol. II, pp. 671 to 704; Minutes of the hearing held on January 21, 2021, Docket Vol. II [last four (4) pages thereof]; Order dated January 21, 2021, Docket Vol. II, pp. 944 to 945. 25. Oath of Commission dated October 22, 2020, Docket Vol. I, p. 337; Minutes of the hearing held on, and Order dated, October 22, 2020, Docket Vol. I, pp. 334 to 336 and 338 to 339, respectively. 26. Exhibits "P-114" and "P-114-A", Docket Vol. I, pp. 377 to 395. 27. Docket Vol. II, pp. 978-1011. 28. Docket Vol. III, pp. 1480-1483. 29. In a Resolution dated May 23, 2021, Docket Vol. III, p. 1485. 30. In a Resolution dated June 21, 2021, Docket Vol. III, pp. 1488 to 1491. 31. Exhibit "R-4", Docket Vol. I, pp. 97 to 102; Minutes of the hearing held on, and Order dated, November 4, 2021, Docket Vol. III, pp. 1505 to 1508-a. 32. In a Resolution dated March 21, 2022, Docket Vol. III, pp. 1539 to 1540. 33. Docket Vol. III, pp. 1515 to 1518. 34. For the CIR, see Docket Vol. III, pp. 1566 to 1578. For Stefanini Philippines, see Docket Vol. III, pp. 1580 to 1622. 35. In a Minute Resolution dated August 23, 2022, Docket Vol. III, p. 1623. 36. Docket Vol. I, p. 9. 37. Docket Vol. I, p. 10. 38. Docket Vol. I, p. 10. 39. Docket Vol. I, p. 10. 40. Docket Vol. I, p. 11. 41. Docket Vol. I, p. 63. 42. Docket Vol. I, p. 65. 43. Silicon Phils., Inc. v. Commissioner of Internal Revenue , G.R. Nos. 184360, 184361 & 184384, February 19, 2014, 727 Phil. 487-506; Silicon Phils., Inc. v. Commissioner of Internal Revenue , G.R. No. 173241, March 25, 2015. 44. Commissioner of Internal Revenue v. United Cadiz Sugar Farmers Association Multi-Purpose Cooperative , G.R. No. 209776, December 7, 2016, 802 Phil. 636-659. 45. Section 112 (C), Tax Code. 46. Section 112 (C), Tax Code. 47. See Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal Revenue , G.R. No. 145526, March 16, 2007, 547 Phil. 332-340. 48. Philippine Airlines, Inc. v. Commissioner of Internal Revenue , G.R. Nos. 206079-80 & 206309, January 17, 2018. 49. G.R. No. 215159, July 5, 2022. 50. Exhibits "P-4" and "P-4-A", Docket Vol. II, p. 1023. 51. Par. 1.1, Stipulation of Facts, Compliance dated October 1, 2020, Docket Vol. I, p. 298. 52. Exhibit "P-3", Docket Vol. I, pp. 142-146. 53. Exhibit "P-4", Docket Vol. I, p. 150. 54. Exhibit "P-4", Docket Vol. I, p. 151. 55. Exhibits "P-6", "P-7", "P-8", and "P-9", Docket Vol. I, pp. 1025-1030, 1031-1036, 1037-1042, and 1043-1048, respectively. 56. Stefanini Philippines, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 10188, November 23, 2022. 57. Par. 1, Stipulation of Facts, Compliance dated October 1, 2020, Docket Vol. I, p. 298. 58. Exhibit "P-6", Docket Vol. II, pp. 1025 to 1030. 59. Exhibit "P-7", Docket Vol. II, pp. 1031 to 1036. 60. Exhibit "P-8", Docket Vol. II, pp. 1037 to 1042. 61. Exhibit "P-9", Docket Vol. II, pp. 1043 to 1048. 62. G.R. No. 234445, July 15, 2020. 63. Exhibits "P-75" and "P-76", Docket Vol. II, pp. 1121 to 1124. 64. Exhibit "P-77", Docket Vol. II, p. 1125. 65. SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. (A) Invoicing Requirements. A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt. The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: (a) The amount of the tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from value-added tax, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale; (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and (4) In the case of sales in the amount of One thousand pesos (P1,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client. 66. Docket Vol. II, pp. 1049 to 1072. 67. Exhibits "P-78" and "P-79", Docket Vol. II, pp. 1126 to 1127. 68. Exhibit "P-78", Docket Vol. II, p. 1126. 69. Docket Vol. II, p. 1096. 70. Docket Vol. II, pp. 1100 to 1101. 71. Docket Vol. II, pp. 1102 to 1105. 72. Docket Vol. II, p. 1114. 73. Docket Vol. II, p. 1115. 74. Docket Vol. II, p. 1097. 75. BIR Records, p. 78. 76. Docket Vol. II, pp. 652 to 653. 77. Docket Vol. II, p. 1116. 78. Docket Vol. II, p. 1117. 79. Docket Vol. II, p. 1098. 80. BIR Records, pp. 82 to 83. 81. Docket Vol. II, p. 1111. 82. Docket Vol. II, pp. 1112 to 1113. 83. Docket Vol. II, p. 1118. 84. Docket Vol. II, p. 1119. 85. Docket Vol. II, p. 1120. 86. Docket Vol. II, p. 1099. 87. BIR Records, pp. 80 to 81. 88. BIR Records, pp. 80 to 81. 89. Exhibits "P-118" to "P-118-A-1", Docket Vol. II, pp. 658 to 668. 90. Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue , G.R. No. 166732, April 27, 2007; San Roque Power Corporation v. Commissioner of Internal Revenue , G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. , G.R. No. 182364, August 3, 2010. 91. Ibid. 92. Ibid. 93. Team Energy Corporation v. Commissioner of Internal Revenue, et seq. , G.R. Nos. 197663 and 197770, March 14, 2018. 94. Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue , supra ; and San Roque Power Corporation vs. Commissioner of Internal Revenue , supra . 95. Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue , supra ; San Roque Power Corporation vs. Commissioner of Internal Revenue , supra ; and AT&T Communications Services Philippines, Inc. , supra . 96. With P0.50 discrepancy against the total per VAT Returns. 97. Valid input VAT Total claim = P5,596,590.06 P9,676,450.52 = 0.5783722 57.84%. 98. Input VAT attributable to zero rated sales Valid input taxes = P5,589,771.14 P5,596,590.06 99.86%. 99. Section 112 (A), Tax Code. 100. Based on Stefanini's Quarterly VAT Returns. See Exhibits "P-80" and "P-81," Docket Vol. II, pp. 1128-1131. 101. Excess of amount in Line 20B over amount in Line 23A in the Quarterly VAT Return. 102. Sum of Lines 21B and 21F in the Quarterly VAT Return. 103. Line 21J in the Quarterly VAT Return. 104. Line 15B in the Quarterly VAT Return. 105. Line 20A in the Quarterly VAT Return. 106. Corresponds to the balance as of December 31, 2017. 107. Exhibit "P-101", Docket Vol. I, pp. 473-474. 108. Exhibit "P-102", Docket Vol. I, pp. 475-477. 109. Exhibit "P-103", Docket Vol. I, pp. 478-480. 110. Exhibit "P-105", Docket Vol I, pp. 484-485. 111. Exhibit "P-106", Docket Vol. I, pp. 486-487. 112. Exhibit "P-113", Docket Vol. I, pp. 526-527. 113. Line 15B in the Quarterly VAT Return. See notes 107 to 112. 114. Exhibit "P-105," Line 23D, Docket Vol. I, p. 484. 115. Exhibit "P-113," Line 23D, Docket Vol. I, p. 526. 116. Exhibit "P-90," Docket Vol. I, pp. 118-138. 117. Exhibit "P-90," Docket Vol. I, pp. 133-134. 118. Stefanini Philippines, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 10188, November 23, 2022. 119. Exhibit "P-114", pp. 35-16, Docket Vol. I, pp. 391-392. DEL ROSARIO, P.J., dissenting opinion: 1. Commissioner of Internal Revenue vs. Philex Mining Corporation , G.R. No. 230016, November 23, 2020. 2. Panasonic Communications Imaging Corporation of the Philippines vs. Commissioner of Internal Revenue , G.R. No. 178090, February 8, 2010; J.R.A. Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 177127, October 11, 2010; Hitachi Global Storage Technologies Philippines Corp. vs. Commissioner of Internal Revenue , G.R. No. 174212, October 20, 2010; Kepco Philippines Corporation vs. Commissioner of Internal Revenue , G.R. No. 181858, November 24, 2010; Silicon Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 172378, January 17, 2011; Western Mindanao Power Corporation vs. Commissioner of Internal Revenue , G.R. No 181136, June 13, 2012; Eastern Telecommunications Philippines, Inc. vs. Commissionerof Internal Revenue , G.R. No. 183531, March 25, 2015. 3. Mirant [Navotas II] Corporation [Formerly Southern Energy Navotas II Power, Inc.] vs. Commissioner of Internal Revenue , G.R. No. 180526, September 23, 2015. 4. Exhibits "P-10" to "P-33", Docket, Vol. II, pp. 1049-1072. 5. Kepco Philippines Corporation vs. Commissioner of Internal Revenue , G.R. No. 179961, January 31, 2011.